Rethinking SaaS & Services sales Negotiations
Before moving into sales leadership, something about the sales process always stuck in my craw. I don’t know what a craw is, actually, but here was that something:
Why do I need a different personality to negotiate a deal than I need to sell it?
Think about it. What are we doing when we first engage with a potential prospect? We’re building a relationship. We’re listening. We’re teaching. We’re establishing a partnership. Hopefully, we’re being transparent, because after all, that’s where trust is truly built.
The buyer’s journey finally reaches a point where they say, “yes”.
This is where our personality changes.
This is where our approach changes.
This is where we…ehem…begin to hide the truth, stretch the truth, and…ok, lie. Flat out lie.
Google negotiation techniques. Most involve some form of lying or trickery.
For example, there’s the “positional bargaining” approach, which involves both parties starting at a somewhat extreme position:
Rep: “The price is $30,000.”
Buyer: “I can’t pay more than $15,000.”
Rep: “Well, we can accept $25,000.”
Buyer: “The highest I will go is $20,000.”
Rep: “Ok…$20,000 it is. But that expires at the end of the month.”
Aaannnndd the buyer ultimately signs the first week of the following month for $20,000.
The $30k price wasn’t the price.
The buyer could pay more than $15k.
The entire conversation sat on a bed of lies – right at the pinnacle of your deal, the goal line of formalization of your relationship.
Other negotiation lies permeate the walls of sales teams like:
- The expiring discount.
- The “I have to run this by our executives”.
- The “I can bring this down 10%, but that’s as far as we’ve ever gone”.
I’ve even heard of reps who quote “above list price” so they have room to discount later.
We’ve been taught to negotiate as though the “transaction” is the sales end. In service-oriented solutions, and by the way, the last “S” in “SaaS” is service, the transaction is the beginning.
While I don’t want the FBI peeping in my windows because I say this, WHY ARE WE LEARNING NEGOTIATE SERVICE-BASED CONTRACTS FROM FORMER FBI HOSTAGE NEGOTIATORS?
Don’t get me wrong, Never Split the Difference is an incredible book. It hits three of my favorite topics – sales, behavioral science, and FBI intrigue. But consider the subtitles,
“Negotiating as if your life depended on it.”
“Field-tested tools for talking anyone into (or out of) just about anything.”
Your deal doesn’t require you acting as though your life depends on it. We don’t get to taze the buyer at the end of a negotiation like we might the perpetrator in a robbery gone wrong. We’re not negotiating the release of hostages from a bank heist. Talking someone into (or out of) something isn’t strengthening a relationship, is it?
We’re negotiating price, payment terms, commitment lengths and deal timing. The long-term value of contracts is what matters – when the buyer stays-and-renews, buys more, and hopefully advocates on our behalf.
Instead of throwing transparency out the window, can we embrace it? Can we build trust to the goal line instead of eroding it? As a result, can we both make our transactions more valuable and more predictable by throwing our cards face-up on the negotiating table?
Can we also deliver, propose and negotiate deals with confidence, both in ourselves and in the integrity of our pricing?
There are four things that matter to you, your company and in every for-profit business on Earth. They are the four levers of negotiating.
- Volume: How much product, technology, services, etc. the customer is committing to. The more, the better!
- Timing of cash: How fast the customer pays. We like money faster rather than slower, right?
- The length of commitment: The longer the customer commits to your product, technology and services, the better for you and your organization.
- The timing of the deal: There is value in your ability to predict, both in terms of your forecast, but also in deploying your finite resources.
If these four are what your pricing is based on (which it likely is…or at least should be), and what drives your business, you can lay those cards on the table for every pricing discussion in a trust BUILDING way.
The levers are the elements you are willing to pay the client for in the form of a concession. Trade more volume for concessions. Trade faster payment for concessions. Trade longer commitments for concessions. Trade deal predictability for concessions. Concessions, like:
- “That’s too expensive. We need that price to come down.”
- “We need to pay monthly.”
- “Our standard terms are NET60.”
- “We need an out clause.”
No word art is required.
No reading of buyer “tells” required.
No lies and tricks are required.
No BATNA is required (Best Alternative To a Negotiated Agreement).
Service and SaaS have changed the engagement requirements, but they have yet to change the sales negotiations approach like the rest of the selling process.
Need some help? Reach out. Transparent Negotiations is the most popular program I teach, it’s easy to learn, easy to embrace, and easy to see immediate results.